It can often be difficult to get ahead financially, between inflation, high interest rates, and the economic pressures of everyday life. A GOBankingRates survey earlier this year found that nearly half of Americans have less than $500 in their savings accounts.
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A financial misstep can cause extreme distress, whether you have savings or not. “Impulsive financial decisions made in the moment can have serious consequences on your finances, forcing you to start from scratch the next morning,” warned Erika Kullberg, attorney, personal finance expert and founder of Erika.com.
Here are six mistakes that money experts say could cost you hundreds, or even thousands, of dollars overnight.
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Putting luxuries on credit cards
The dangers of overusing credit cards are well recognized, but they bear repeating. With the average credit card interest rate at 27.70% for the week of June 10, according to Forbes Advisor, a simple purchase can cost you hundreds in interest if you need more funds to pay it off immediately.
Spending too much on luxuries can lead to serious credit card debt, and interest can add up quickly. “Charging for purchases you don’t really need is a mistake,” Kullberg said. “While it may be tempting to load up on expensive gadgets, like gadgets or designer clothing, these additional expenses will quickly rack up debt and interest on your account.”
Payday Loans
If you’re short on cash, you might consider taking out a payday loan to buy groceries or keep the lights on for another month. Kullberg called this “financial folly,” highlighting astronomical interest rates that far exceed rates on credit cards or personal loans.
“If you miss a payment, you will face even more charges. Now you owe them several times over just for borrowing from them in the first place. “This is the perfect slippery slope to start taking on more debt, which grows exponentially and extremely quickly,” he said.
Fall for scams
Phishing scams that prompt users to reveal their bank account information remain common, as does the “grandparent scam,” in which a scammer impersonates a loved one and requests a wire transfer or credit card. gift card. Be careful where and when you share your personal information.
Account transfers to Zelle, which is designed to be a payment platform for family and friends, are often irreversible if you mistakenly send money to a cybercriminal. That’s a costly mistake.
Only use Zelle for transfers to family or friends. And if you send payments through Paypal or Venmo, don’t check the “family and friends” box unless it’s someone you know.
If a stranger on Facebook Marketplace or an online vendor asks you to use that option to save on fees, it’s a big red flag, and it’s also against PayPal’s terms of service.
Risky investments
If you have some extra money in the bank after you’ve built up comfortable emergency savings, you probably already know to put that money to work for you in the form of investments.
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“Bad investments can wipe out your savings before you know it,” Kullberg said. “Putting your money into unproven cryptocurrency schemes, get-rich-quick penny stocks, or dodgy business ideas without doing your homework can result in a catastrophic loss of funds.”
Instead, diversify your portfolio and talk to a financial advisor if you need guidance, he recommended.
Do not purchase voluntary ancillary benefits such as dental and vision coverage through your job
If your take-home pay is barely enough to cover your monthly expenses, you may be hesitant to invest in voluntary insurance products offered by your employer. But if you need emergency dental or vision care, chances are your health insurance won’t cover it. Not having the right insurance can cost you hundreds or thousands in medical bills overnight.
“Too many employees (and business owners, for that matter) make a big mistake by not opting for group dental or vision coverage when it’s offered,” said Michael Cohen of The DBL Center, an insurance wholesaler that specializes in mandatory benefits. and volunteers for employees.
If your job is one of the 86% of large companies that offer dental coverage, according to The DBL Center, be sure to sign up. “For just a few dollars out of each paycheck, employees can get coverage that includes preventive care and emergency care. treatments and even expensive oral surgeries,” Cohen said.
Likewise, vision care is worth it whether you need corrective lenses or not; Something as common as cataract surgery can cost between $3,000 and $6,000 per eye, according to data from UFCHealth.com.
“If you don’t take advantage of ancillary benefits with pre-tax dollars, especially if your employer shares the costs, you risk taking a tremendous financial hit if you or a family member needs care,” Cohen said.
Do not invest in pet insurance
Likewise, some employers today offer pet insurance as a voluntary or cost-sharing benefit to employees. If you have a cat or dog, your monthly pet insurance premium of less than $50 a month could add up to thousands of dollars in savings if your pet suffers a health emergency.
“Most people don’t think twice about paying for health insurance for ourselves and our family members,” Cohen said. “As a cat owner, it was a no-brainer for me to also invest in pet insurance. Cats and dogs get sick the same way we do. They can get into things in the home or outdoors and cause catastrophic injuries. Knowing that our pets are covered in an emergency, for less than the price of a nice monthly dinner, offers great peace of mind.”
Be sure to read the fine print before choosing a policy, as most reimburse vet bills and some have waiting periods before they take effect. You may still have to pay for any treatment before insurance will reimburse the costs. “Talk to a licensed insurance broker if you’re not sure which policy is best for your needs and budget,” Cohen advised.
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Using a 0% APR credit card without a plan to pay it off
If you have an emergency expense, whether it’s vet bills, dental surgery, or home repairs, it can be tempting to put it on a 0% interest credit card. Likewise, if you’re consolidating debt by opening a 0% balance transfer card, you might think you’re reducing your monthly expenses and giving yourself a break.
But be careful. You must calculate how much you must pay monthly to reduce your balance to zero before you are charged interest. And that interest will be retroactive from the time you transferred the balance or made the purchase with the card.
“Credit card interest rates are quite high, typically over 20 percent, and nonpayment can incur hundreds of dollars in interest that can quickly diminish your financial well-being,” Kullberg warned.
With a little forethought, careful budgeting, and expert guidance, you can avoid these six financial mistakes, protect your financial well-being, and start putting your money to work for you.
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This article originally appeared on GOBankingRates.com: These 6 Money Mistakes Can Cost You Hundreds of Dollars Overnight
